Private health insurance is becoming a bigger financial burden for Australians, with many paying higher premiums while receiving fewer benefits. The AMA warns reforms are needed.
The Rising Cost of Premiums and the Decline of Benefits
The AMA’s report paints a picture of a health insurance system that’s growing more expensive while offering less in return. Since 2008, premiums have increased by over 100%, a stark contrast to the less than 20% increase in the Medicare Benefits Schedule (MBS) during the same period. This means that while Australians are paying more for their policies, the government-backed payments for services aren’t growing at the same rate.
Even worse, the benefits paid for in-hospital medical treatments have only increased by 18.1% over the past six years, despite insurers’ profits growing by nearly 50% during that time. These figures highlight a significant imbalance: Australians are being asked to pay higher premiums, but when it comes time to claim, the benefits they receive don’t seem to match up. It’s no wonder that people are beginning to question whether the system is worth it.
Gold-Tier Policies in Decline
One of the more concerning findings in the AMA’s report is the decline in the number of people holding gold-tier policies. These policies, once considered a premium option for comprehensive coverage, have seen a drop of 360,000 since the COVID-19 pandemic began. It seems that as premiums rise, more Australians are opting for cheaper, lower-tier policies—or, in some cases, walking away from private health insurance altogether.
The pandemic certainly exacerbated the situation, with many Australians re-evaluating their financial priorities. As the cost of living increases, private health insurance has become one of those expenses people feel they can no longer justify, especially when they feel like they’re not getting their money’s worth. As Dr. Danielle McMullen, President of the AMA, points out, “Public hospitals are struggling, which is pushing more people to the private sector, but with rising premiums and low value offerings, consumers are facing tough choices about the cover they can afford.” reports 9News.
A Call for Reform
So, what’s the solution? The AMA believes that the current private health insurance system is in desperate need of reform. Dr. McMullen is calling for the establishment of an independent Private Health System Authority to regulate the sector and ensure fair pricing and better value for consumers. She argues that insurers should be required to return at least 90% of premiums to consumers as benefits, a figure she believes is both reasonable and achievable given the growing profits in the sector.
The reality is that private health insurance is no longer delivering the value it once did. And while it’s important for insurers to remain profitable, it shouldn’t come at the expense of the consumers who rely on them for essential healthcare coverage. The AMA’s push for reform is a necessary step toward a more balanced system that works for both insurers and policyholders.
What’s Next for Private Health Insurance?
The growing dissatisfaction with private health insurance can’t be ignored. Australians are increasingly questioning whether the money they spend is truly worth the benefits they receive. If these trends continue, we could see more people abandoning private health insurance altogether, choosing instead to rely on the public healthcare system.
For the government and insurers, the clock is ticking. If they want to restore faith in the system, reforms are needed. Whether it’s by adjusting premiums, improving benefits, or creating a new regulatory body, change must come soon. Otherwise, the private health insurance industry might find itself on a downward spiral, where customers simply don’t see the value in continuing to pay for coverage.
